) or H-P went up 5.4% in after-hours trading post
better-than-expected fourth-quarter of fiscal 2013 results.
H-P's fourth-quarter non-GAAP earnings of $1.01 per share beat
the Zacks Consensus Estimate by a penny. Although the company's
earnings improved 17.4% on a sequential basis, they were down
12.9% on a year-over-year basis.
H-P's revenues of $29.1 billion beat the Zacks Consensus
Estimate of $28.1 billion despite 2.8% decline from the year-ago
quarter. On a sequential basis, revenues improved 7%.
revenues declined 1.7% year over year to $8.58 billion, primarily
due to 10% revenue decline in the consumer segment which more
than offset the 4% increase in revenues from the commercial
The growth in the commercial revenues was driven by robust
performance of its Ultrabook-HP EliteBook Folio. Total units sold
were up 2.0% compared to the year-ago quarter. While Desktop
units declined 5.0%, Notebook units were up 3.0%.
revenues were down marginally (down 0.6%) year over year to $6.04
billion. Despite the revenue declines, total hardware units
increased 6.0% year over year due to increase in laser volume and
SMB home business.
The segment's commercial hardware revenues grew 3.0% from the
year-ago quarter buoyed by its transactional laser, management
services and graphics business. Consumer hardware revenues
increased 7% during the period due to traction in its Officejet
Pro X. However, these increases were more than offset by a 4%
decline in Supplies revenues.
Revenues from the
were up 1.8% from the year-ago quarter to $7.59 billion as H-P's
Industry Standard Servers, networking and storage performed
Apart from this, revenues from the Industry Standard Servers
increased 10.0%, while Business Critical Systems revenues slumped
17.0% from the year-ago quarter due to declines in the UNIX
Moreover, Storage revenues increased 1.0% from the year-ago
quarter due to robust growth in converged storage space.
Technology Services revenues were down 6% on a year-over-year
revenues were down 9.4% year over year to $5.76 billion, bookings
during the quarter increased 30% from the year-ago quarter,
primarily driven by growth in renewals.
Revenues were impacted by a 10.0% decline in Application and
Business Services revenues and 9% decline in IT Outsourcing
revenues also declined 9.1% year over year to $1.06 million
primarily due to tough year-over-year comparisons due to the
) contract signed in the year-ago quarter.
Support revenues were up 4.0%, while license revenues were
down 24%. Professional services revenues were down 13% year over
year but SaaS revenues were up 15.0%. SaaS revenues increased
higher bookings from its business units, mainly in Autonomy, IT
Management and Fortify on Demand.
HP Financial Services
revenues declined 5.6% year over year to $912.0 million primarily
due to volume declines. Financing volume declined 3%
year-over-year and had net portfolio assets of $12.2 billion.
H-P's gross margins were down 121 basis points (bps) on a
year-over-year basis to 23.0% primarily due to lower revenue
base. Moreover, unfavorable product mix and pricing pressures
Although H-P's operating expenses were down 1.4% from the year
ago quarter to $4.1 billion, as a percentage of revenues,
expenses were up 20 bps. This impacted operating margins, which
contracted 142 bps to 9% on a year-over-year basis. H-P's
non-GAAP net margins were also down 89 bps on a year-over-year
Balance Sheet and Cash Flow
The company ended the quarter with $12.2 billion in cash and
cash equivalents versus $13.3 billion in the previous quarter.
The company had a long-term debt balance of $16.6 billion, down
from $17.1 billion in the previous quarter.
H-P generated $2.82 billion in cash from operations versus
$2.67 billion in the previous quarter. During the quarter, H-P
repurchased stocks worth $479 million and paid dividends of $284
H-P expects its non-GAAP earnings for the first quarter of
2014 to range between 82 cents and 86 cents per share and that
for fiscal 2014 to be within $3.55 to $3.75.
H-P expects revenues from Personal Systems to decline further
due to higher commodity costs. The company also forecasts
revenues from Enterprise Group to decline sequentially but
expects to gain traction in converged storage and networking and
Moreover, revenue run-off from fiscal 2013 is expected to
impact Enterprise Services segment revenues. The company's shift
toward the SaaS is expected to continue in this quarter as
Although H-P reported better-than-expected top and bottom-line
results, the year-over-year comparisons were dismal. Pricing
pressures also impacted margins. Moreover, the company did not
provide an encouraging guidance.
Nonetheless, the company's tractions in the cloud, security
and big data segments are the positives, going forward.
Restructuring initiatives and management changes are also
expected to keep the company in the growth path. The company's
shift to core software business will also help it to achieve
However, continuing macroeconomic challenges, tepid IT
spending and competition from
International Business Machines
) are the headwinds, going forward.
Hewlett-Packard has a Zacks Rank #3 (Hold).
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